All-day Egg McMuffins helped break McDonald’s six-quarter sales slump, but breakfast is just part of the CEO’s plan.
McDonald’s introduction of all-day breakfast is resonating with customers and it’s showing in both sales and stock prices. News of better-than-expected quarterly sales caught the attention of investors who helped the company’s shares rise 3% to reach a record-high of $121.90 in late January.
The surge in sales after six quarters of stagnant numbers comes on the heels of the company’s introduction of a turnaround plan meant to help it better compete against the likes of Wendy’s, Starbucks and Burger King. Those fast-food giants have focused on breakfast items while introducing other value options to entice customers through their doors.
Seeing a gap in its offerings, McDonald’s new CEO Steve Easterbrook laid out a turnaround plan last year. One of the plan’s pillars was the October rollout of all-day breakfast items, such as the chain’s popular Egg McMuffins and hash browns. The rollout is credited with helping spark the company’s sales surge. U.S. restaurants open for at least 13 months saw sales climb by a whopping 5.7% in 2015’s fourth quarter. Analysts had forecast average growth of only 2.7%.
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While all-day breakfast is getting the credit for helping McDonald’s transform lackluster results into record-breaking stock prices, it’s not the only measure the company is pursuing to drive sales. Easterbrook, who has helmed the company for less than a year, has also switched the chain to antibiotic-free chickens, raised worker wages, lowered prices and simplified the menu. Plans are in the works to introduce cage-free eggs and speed up service. The company also recently introduced a McPick 2 for $2 value menu that includes such selections as the McChicken sandwich and the chain’s new mozzarella sticks.
Change is in the air at McDonald’s, but some fear the bolstered numbers may be only temporary. QSR Magazine’s Editor in Chief Sam Oches recently questioned the sustainability of all-day breakfast as a driving force behind sales. Easterbrook doesn’t disagree.
“All day breakfast is understandably more of a headline grabber,” MarketWatch quoted Easterbrook as saying. “It will settle down a little from its launch phase, but we believe that building these other platforms of growth on top of that will keep us competitive in the marketplace.”
Time will tell if that’s true. In the meantime, McDonald’s investors can take comfort in the fact that the turnaround plan has worked enough to break that six quarter streak of falling numbers.
